On Hold for 45 Minutes? It Might Be Your Secret Customer Score

Retailers, wireless carriers and others crunch data to determine what shoppers are worth for the long term—and how well to treat them

Two people call customer service at the same time to complain about the same thing. One waits a few seconds before a representative gets on the line. The other stays on hold. Why the difference?

There’s a good chance it has something to do with a rating known as a customer lifetime value, or CLV. That secret number is used by all manner of companies to measure the potential financial value of their customers.

Your score can determine the prices you pay, the products and ads you see and the perks you receive.

.. “There’s no free lunch,” says Sunil Gupta, a marketing professor at Harvard Business School who has researched models for calculating lifetime value. “The more profitable you are, the better service you will get.”

.. Everyone with a bank account, cellphone or online shopping habit has at least one CLV score, more likely several. And most people have no inkling they even exist, let alone how they are used, what goes into them or how accurate they are. Unlike credit scores, CLVs aren’t available to consumers and aren’t monitored by any government agency.

.. “Not all customers deserve a company’s best efforts,” says Peter Fader, a marketing professor at the University of Pennsylvania’s Wharton School who helped popularize lifetime value scores. His scoring method is based on transaction history, which he says is all companies need to determine how customers will behave in the future.
.. Some companies deduct points from shoppers who exhibit costly behaviors. Banks sometimes take into account the calls people make to customer-service agents or the number of times they visit branches. Online retailers track shoppers who buy things only when they are deeply discounted. People expected to cost more than they spend can have a negative score.
.. At some carriers, high-value customers who are at risk of switching to another carrier are prioritized and get routed to a top-rated call center.
.. his e-commerce clients use scores, including CLV, to respond to email inquiries. “If you’ve got an angry shopper with a high lifetime value, you might want to bump up the priority,” he says.
.. Shoppers with higher scores, however, won’t necessarily get the best deals all the time, says Jerry Jao, chief executive of Retention Science, which has worked for companies such as Target Corp. and Procter & Gamble Co. Retailers sometimes withhold discounts to high-value customers until they are at risk of losing them. “Why waste a 25% offer when the person is going to buy anyway?”
.. The scoring helps dealerships weed out costly customers. “This is what you call grinders—people who visit 16 stores to get the absolute lowest price,” he explains.
.. his firm develops scores by crunching data on things such as previous car purchases, whether a household has a teenager, where else a person has shopped and ZIP Codes, which can be used as a proxy for income. Someone who has a Neiman Marcus credit card is going to be more valuable for a car dealership than someone with a credit card from a discount chain
.. The company tracks, for example, the number of times a person calls to complain over the prior 90 days, which can affect the CLV.An airline can compare how often a shopper complains with his or her lifetime value and customer experience score, which measures inconveniences such as number of times in the middle seat, flight delays and lost bags.

“A high-value customer who had a real service disruption and never calls to complain should be compensated more quickly than someone who is complaining and costing time and money,” Mr. Srinivasan says.